Notice: Investigation of Locking Restatement Activity

December 8, 2006



Re: Investigation/Locking Restatement Activity



In accordance with its mandate under the Alberta Electric Utilities Act (Act) and its MSA Investigation Procedures the Market Surveillance Administrator (MSA) has commenced an investigation into certain locking restatement activity affecting the Alberta electricity market during October, 2006.  The investigation is focused on the conduct of one market participant organization.


The MSA has a broad mandate of surveillance and investigation around all aspects of the province’s electricity markets, and seeks to ensure the fair, efficient and openly competitive operation of the market.  As part of its mandate, the MSA may publish reports to give guidance to the market as to the MSA’s view of what is fair, efficient and openly competitive. In this regard, the MSA published its reports Undesirable Conduct and Market Power on July 26, 2005 and A Common Understanding: Fair, Efficient and Openly Competitive on November 4th, 2005. In relation to locking restatement activity these documents suggest the following:  

1. High fidelity price signal:  A price signal that is reflective and responsive to changes in fundamentals such as fuel prices, outages, and supply-demand balance.  It is particularly important in an energy-only market that prices are able to reflect conditions of scarcity.

2. Competitive response: In a competitive market, if a participant is able to profit from an innovative strategy, there should be a timely response from other market participants to contest this profit. 

3. Balance between risk and reward:  In a competitive market there should be opportunities for profit for those willing to take risks.  For reasons of equity and efficiency it is important that potential risk and reward are balanced.

In the view of the MSA, the inappropriate use of locking restatements may negatively impact the fair, efficient and openly competitive operation of the market, contrary to s.6 of the Act.

Reference materials relevant to locking restatement activity in general can be found on the MSA website:

Undesirable Conduct and Market Power

A Common Understanding: fair, Efficient and Openly Competitive

Next Steps

The MSA will provide further information about these matters at the conclusion of the investigation, in accordance with its mandate.

Yours truly,

“Original signed”

W.W. (Wayne) Silk
Vice President and
Chief Operating Officer